The report's author is Lauren Freedman, the CEO of the e-tailing group. Knowing that effective merchandising is essential to increasing conversion, in a related survey Freedman asked 250 merchants to rate a list of 44 merchandising techniques. She ranked their responses on a descending scale, with the most popular techniques near the top.

Note that the top tactic, seasonal promotions, is as old as retailing itself.
"Retailers have lived and died by that for years," notes Freedman. Cross-sells and up-sells are also timeless strategies. But many of these popular merchandising tactics are completely Web-centric  search shows up twice in the top ten (keyword search and advanced search). In short, successful e-tailing is a combination of very old and very new techniques.

E-mail marketing is, of course, a leader. Even though it ranks second, it could be seen as number one, since top technique "seasonal promotions" comes and goes, but e-mail is 52 weeks a year.

Using "time-based" tactics is also a merchant favorite. These include limited time discounts, free shipping for a certain period, or a special deal that coincides with a seasonal event  in other words, the age-old tactics that brick and mortar sellers have always used. One proven winner is the free trial period.

Merchants reported great success with presenting lists of "what's hot" and "what's new," updated frequently. Presenting the "best seller" list throughout the site harnesses the power of group psychology and is a sure sales booster, merchants say.

It's no surprise that free shipping is listed among the top ten conversion drivers, yet merchants reported struggling with the right balance. Driving conversion is one thing, but driving profitable conversion is another. In Freedman's yearly "secret shopping" survey (in which she shops at 100 Internet sites and records the results) she found that in the 2004 holiday season, just 46 out of 100 e-tailers offered a free shipping option with a qualified purchase.

Though free shipping isn't universally adopted, stories abound about its effectiveness as a conversion increaser. One merchant noted that free shipping is even more of a sales driver than a 20-30 percent discount. Another noted that
a free shipping pop-up on the home page always bumps the site's conversion rate by a few percentage points.

E-tailers are developing an ever-more impressive array of tools, Freedman notes. "The depth and breadth of merchandising and marketing tools being offered on sites has grown exponentially with increased cross-channel integration, resulting in more compelling customer experiences," she says.

Does Your Site Actually Work? As Freedman surveyed e-tailers, they often spoke of the importance of basic functionality. A site must be error-free  no broken links anywhere, no improper labeling - or shoppers quickly flee. She cited additional research by Hostway indicating that 70 percent of shoppers were likely to not buy from (or even return to) a site at which they ran into a basic problem.

A critical part of this basic functionality is customer-based navigation.
"This includes quick access to key categories, including customer service, cross-channel capabilities and search, as well as information about the company as a whole," Freedman notes. One merchant in her survey recommended having a layperson surf the site to remove as much industry-specific lingo as possible.

A navigation improvement tactic used by many merchants is to show subcategory links earlier. Instead of just showing, say, links to men's and women's shoes on a front page, show links to men's and women's athletic, dress and casual shoes. Shoppers who arrive at their destination faster are more likely to buy, and hidden merchandise won't sell.

The foundation of shopper-centric navigation is effective on-site search. A recent study by Forrester Research indicates that 74 percent of shoppers with four years of online experience say relevant search is important to them.

But many sites do not yet have a good search tool. There's a "serious divide between the haves and have-nots when it comes to on-site search," Freedman finds. To be sure, adding a quality search tool represents an extra expense for a merchant  yet it's well worth the investment. "For those who don't yet have a strong search experience on their site, I'm confident that adding functional search is a surefire way to drive conversion," she says.

For example, Shoe e-tailer FootSmart reported that a "shoe finder" advanced search box on its home page resulted in a remarkable 23 percent conversion rate.

The secret weapon: combining e-mail marketing and search. Several forward-thinking merchants are adding a search box to all their HTML customer e-mails. One merchant found that this set a record for e-mail sales.

Loyalty and ConversionOne of the rising trends among online merchants is the creation of loyalty programs  special offers given to recurrent shoppers or those who join a membership program. This strategy is well established in the brick and mortar world: over 75 percent of offline retailers have a loyalty program. While just 24 percent of online retailers now offer loyalty discounts, an additional 43 percent are planning on adding one, according to Jupiter Research's 2005 Customer Loyalty Report.

According to Jupiter, the top three tactics that merchants use to maintain loyalty are exclusive offers and events, promotions on a regular basis and premium customer service.

Retailers know that loyalty is big business. A study by Bain & Co. revealed that a 5 percent increase in shopper retention rate translates to a 25 percent to 95 percent increase in profits.

Let Them See ItOffering alternate views of a product is a clear sales driver. Even the simple zoom  the "click to enlarge photo" option  boosts conversion. One merchant in Freedman's survey has 19,000 images with a zoom option, along with many presented without a zoom option; the merchant reported a 10 percent higher conversion for the zoomed photos.

Would You Like Shoes with that Dress? Offering a shopper a well-chosen item that complements what they're already buying or offering them a more expensive item  a relevant cross-sell or up-sell  is a definite sales booster.

Freedman's annual survey of online merchants indicates that 21 percent of sellers derive three to seven percent of their revenue from cross-sells.

The fact that 51 percent don't know how well cross selling or up selling is working for them suggests that many merchants aren't using their Web analytics software to monitor their sales tactics  at great loss to their bottom line.

The "secret" to the effective cross-sell, of course, is selecting the perfect items to offer with each sale. This is where a merchant's knowledge of their shoppers makes a huge difference. Based on instinct (or a glance back at their shoppers' purchase history) each e-tailer can offer the most seductive mix.

Preventing Abandonment: Shopping Cart FixesOnce a shopper has actually placed goods in a shopping cart, the sale is all but made, right? Since merchants realize this is far from true, the burning question is: what can e-tailers do to lessen shopping cart abandonment?

Freedman's merchant survey reveals that cart abandonment is a common occurrence at all sites, with the largest percentage of merchants reporting a hefty 41 to 50 percent abandonment rate.

Among the tactics that merchants use to reduce cart abandonment:

Put the checkout process all "above the fold" in the browser window: all shopper data entry boxes should require no scrolling down to see.

Make it a stepped process and let shoppers know which step they're on.

Changes to the shopping cart should be possible without leaving that page.

Something as simple as changing the size and color of the "Buy" button creates marked increases in conversion rates.

Contrary to popular belief, cart abandonment is not always a loss for merchants. For many shoppers, the cart is merely a holding pen, and "shoppers often return within 30 days to complete their order," Freedman says. With this in mind, some merchants automatically generate an e-mail to those shoppers who leave their cart, offering 10 percent off on their next purchase, if they are already registered users.

Post-Sale Conversion StrategiesA merchant's best customers are those who have already bought from them. Many merchants have strategies for post-sale communications with shoppers, knowing that this is a lucrative target audience. Among the top post-sale strategies Freedman found:

Send an e-mail two weeks after purchase asking buyers to rate the product: The value here is in developing a relationship with customers  a customer who gives feedback is closer to a business. If they're posted on the site, these reviews create a community of shoppers. A related technique: send a short e-mail survey after purchase, along with a discount coupon when they complete it

Send an e-mail two weeks after purchase that offers related items:Petco reported that these e-mails are opened twice as often as its usual e-mails, even without an additional discount incentive.

Send e-mails to buyers letting them know when items similar to past purchases are going on sale: One merchant reported that this boosted conversion three times higher than typical e-mails.

In the shipping container, include a time-sensitive offer, like a discount or a free shipping offer: Clothing seller Boston Proper inserts an offer in every shipping container, good for free shipping on the next purchase, and reported that it's been the most successful "bounceback" tactic so far.

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